Budget measures defeated

Election results

The special-election ballot agenda crafted by Gov. Arnold Schwarzenegger and legislative leaders to bail some of the water out of California's leaky financial boat went down to a crushing defeat Tuesday.

Voters decisively rejected five ballot propositions that were sold as reforming a dysfunctional state budgeting process and sealing the February agreement to wipe out a $42 billion deficit.

But the deficit quickly reopened, pushed by the struggling economy and now the defeat of the budget package to $21.3 billion.

With a light voter turnout Tuesday, Propositions 1A through 1E, the measures directly pertaining to the budget, all lost by huge margins.

Only Proposition 1F, which denies pay increases to state elected officials when the state is running a deficit – such raises rarely happen anyway – won easily.

Although Schwarzenegger called the special election and was the driving force to pass the six propositions on the ballot, he spent Election Day in Washington, rather than making the traditional last-minute appeal for votes in California.

The Republican governor attended a White House ceremony where President Barack Obama announced that the federal government would enact tough fuel efficiency and vehicle emissions standards. The guidelines are modeled in part after California's regulations to limit greenhouse gases that were blocked by the Bush administration.

Schwarzenegger issued a statement Tuesday night saying that he and the Legislature would be back at work Wednesday to balance the budget in the short term and reform the budgeting process in the long term.

“Tonight we have heard from the voters and I respect the will of the people who are frustrated with the dysfunction in our budget system,” he said. “Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions.”

The governor added, “We must also continue to fight for real, comprehensive budget reform that brings stability to California's budget process and forces the state to save in the good times so that we do not face these kinds of deep deficits, devastating cuts and tax increases when the economy takes a downturn.”

Senate President Pro Tempore Darrell Steinberg, D-Sacramento, signaled that tax increases, which were probably the biggest contributors to the ballot agenda's rejection, are off the table.

“The voters have spoken, and they are telling us that government should do the best it can with the money it has,” Steinberg said.

Jonathan Wilcox, spokesman for the No on 1A campaign, hailed the election results Tuesday night.

“The size and scope of this landslide represents the dimension of the voters' frustration with Sacramento. To the politicians, this comes as a total shock, but the conditions that brought it about have been coming for years,” Wilcox said.

Tuesday's special election grew out of the budget agreement the Legislature reached in February after a bitter three-month standoff.

The agreement, hammered out by Schwarzenegger and legislative leaders of both parties, drew only six Republican votes – the bare minimum needed to reach the two-thirds vote required to pass a budget in the Legislature.

At the time, it was believed that the $6 billion immediately generated by the propositions would finish the job of wiping out a $42 billion deficit that was mostly covered through tax increases, spending reductions and borrowing.

But the sagging economy depressed tax receipts and reopened a cavernous deficit in the weeks before the election that grew to $15.4 billion, even if the propositions passed, and $21.3 billion if they didn't.

Because the complicated budget agreement hinged on amendments to the state constitution, it could not be fully implemented without the voters' approval.

The linchpin of the ballot agenda was Proposition 1A, designed to restrain future state spending and require a larger reserve fund to make more money available during economic downturns.

It also would have extended temporary two-year tax increases approved in the budget deal for another two years – generating an additional $16 billion in taxes.

That quickly became the most controversial feature of the entire package, spawning a wave of talk-radio-driven tax protests around the state, including Saturday's “tea party” that attracted about 200 people to San Diego's Spanish Landing.

Taxpayer organizations contended the spending cap in Proposition 1A was phony and would do little to curtail what they regard as out-of-control state spending. They also depicted the measure as a huge tax increase.

Proposition 1A also drew opposition from liberal activists and some public employee unions that feared it would result in vital state programs being slashed and cost state workers their jobs.

Proposition 1B was added to the agenda to neutralize the powerful California Teachers Association, which has demonstrated in the past a willingness to spend as much as it takes to sink ballot propositions it opposes.

The measure would give schools $9.3 billion to compensate for past budget cuts and was drafted so that it could only take effect if Proposition 1A also passed – forcing the teachers association to support 1A as well.

Most critical to the immediate budget crisis was Proposition 1C, which would have authorized the state to immediately borrow $5 billion against future lottery proceeds.

Propositions 1D and 1E required voter approval because they would have diverted money from voter-approved initiatives.

Proposition 1D would have shifted $600 million in tobacco-tax funds allocated for children's health and social services to the general fund to help balance the budget. Voters approved the tobacco tax in 1998.

Proposition 1E would have diverted $230 million in funds targeted for community mental health programs to the general fund. Voters approved the funds in 2004 with Proposition 63, which imposed a 1 percent surtax on people earning more than $1 million a year to be dedicated to community mental health services.

In campaigning to pass the six propositions, Schwarzenegger led what would normally be a formidable bipartisan coalition of business groups and labor unions that raised nearly 10 times as much money as the opposition.

But it came at a time of mounting public distrust of the Sacramento establishment.

A Field Poll released early this month showed that 33 percent of the state's registered voters approve of the job Schwarzenegger is doing, and 14 percent think the Legislature is doing a good job.